What is The Proof of Stake? (PoS)
Proof of Stake is a different way of reaching decentralized consensus based on transactions. This is still an algorithm and the goal is the same as the Proof of Work (HyperLink). However, the process of reaching the target is quite different. This idea was suggested in the BitcoinTalk forum in 2011. But the first digital currency to use this idea was Peercoin in 2012 with ShadowCash, Nxt, BlackCoin, NuShares / NuBits, Qora and Nav Coin.
The network transactions are being verified differently with Proof of Stake than the Proof of Work. In fact, this process is not exactly mining, but it is called “minting”, that is, coining money. For this reason, those who do this work are also called counterfeiters.
Unlike the Proof of Work, a system that rewards miners who solve mathematical problems to verify transactions and create new blocks, the creator of a new block is determined decisively. It is also called a bet.
No block rewards here. Also, all digital currencies are created at the beginning and the numbers never change. This means that there is no block award in the PoS system, so the miners will charge the transaction fee. The award to be earned with the proof of stock is similar to your coin amount in the wallet.
What are the advantages and disadvantages?
This system, which should not be seen as mining, consumes less electricity. For this reason, it is both materially useful and environmentally sensitive. According to the Proof of Work, very serious computing power is not used in the background. That’s why it’s faster. However, system security is less than that of Proof of Work. Verification in Proof of Stake is randomly selected depending on the amount of cryptocurrency in the wallets of people. There is a danger of changing the records made. It is also open source, so it can be developed by everyone, not just by a certain person. Because it is sustainable, it is considered as the future of cryptocurrencies.
Why does Ethereum want to use the Proof of Stake?
Ethereum’s founder, Vitalik Buterin, is planning to make a compulsory fork to pass from the Proof of Work to Proof of Stake. On a distributed basis on the basis of proof of work, miners have a lot of energy needs. A Bitcoin transaction requires the same amount of electricity as powering 1.57 American homes per day. (2015 data). These energy costs are paid in nominal currencies, which lead to a constant downward pressure on digital currency value. In a recent survey, experts suggested that Bitcoin transactions could consume as much electricity as Denmark until 2020. Developers are worried about this issue, and the Ethereum community wants to use the Proof of Stake for a greener, cheaper distributed system. Also, the rewards for creating a new block are different: By the Proof of Work, the miner does not have any of the digital money he mined. In the Proof of Stake, the counterfeiters are the ones who always own the money that they produce. For this reason, if you have enough money in your wallet, you will receive a prize, so you can make money.